Israel was founded in 1948 on Socialist principles that protected manufacturers from foreign competition. But in the mid-1980s, the country made a dramatic reversal of those principles, converting to a Free Market, capitalist system.
And while public sector corporations were privatized, bureaucracy, red tape, and protectionist policies were discouraged. Actually, competitiveness and productivity were encouraged, especially in the technology industry. But somewhere along the way in becoming more competitive in the global economy, the protectionist attitudes toward the food industry remained.
New 'Cornflakes’ legislation may lower food import prices in Israel 7h0PtRcVdp
— Haaretz.com (@haaretzcom) June 20, 2016
Israel is about to revise one of its oldest protectionist policies, putting a stop to what Reuters is calling the decades-long coddling of domestic manufacturers. This would allow freer competition for some food imports, and is in response to public outrage over the exorbitantly high prices being charged for many items from foreign manufacturers.
Strangely enough, while food prices in Israel have risen over 50 percent since 2000, wages are still 17 percent below average Western wages. Products like dairy, eggs, and soft drinks are particularly expensive. And this stems from the fact that despite a shift to a free economy in 2003, socialist principles are still in existence in many areas of the nation.
The cost of living in Israel is another thorn in the side for consumers. It is 20 to 30 percent higher than in Spain and South Korea, countries that have a similar per capita GDP to Israel. The cost of living fired up mass protests in Israel in 2011, helping several reformist parties to get in the door of Israeli politics.
The new law will create good competition
Under the Cornflakes Law, an imported only needs to declare that the goods meet EU and Israeli health regulations, instead of presenting original documentation from the manufacturer. The health ministry only checks the products once they get in the store.
The government hopes this will create competition between the likes of Kellogg’s and Telma, owned by Unilever, an Israeli maker of cereal and, in pasta, between Italy’s Barilla and Israel’s Osem, owned by Nestle. “The four biggest (food) companies control 35-40 percent of the market,” Amir Reshef, a finance ministry official told Reuters.
Reshef is talking about a dairy group called Tnuva, which also produces frozen vegetables and schnitzel, Strauss, which sells milk, coffee, ice cream, chocolate and snacks, Osem, a manufacturer of snacks, pasta, drinks and sauces, and Coca-Cola Israel. These four companies control close to 40 percent of the market.
